Correlation Between Sonova H and Medartis Holding

Can any of the company-specific risk be diversified away by investing in both Sonova H and Medartis Holding at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sonova H and Medartis Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sonova H Ag and Medartis Holding AG, you can compare the effects of market volatilities on Sonova H and Medartis Holding and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sonova H with a short position of Medartis Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonova H and Medartis Holding.

Diversification Opportunities for Sonova H and Medartis Holding

0.28

Correlation Coefficient

Sonova H  Medartis Holding

Modest diversification

The 3 months correlation between Sonova and Medartis is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sonova H Ag and Medartis Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medartis Holding and Sonova H is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sonova H Ag are associated (or correlated) with Medartis Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medartis Holding has no effect on the direction of Sonova H i.e., Sonova H and Medartis Holding go up and down completely randomly.

Pair Corralation between Sonova H and Medartis Holding

Assuming the 90 days trading horizon Sonova H Ag is expected to under-perform the Medartis Holding. But the stock apears to be less risky and, when comparing its historical volatility, Sonova H Ag is 2.85 times less risky than Medartis Holding. The stock trades about -0.05 of its potential returns per unit of risk. The Medartis Holding AG is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  5,300  in Medartis Holding AG on December 5, 2024 and sell it today you would earn a total of  1,910  from holding Medartis Holding AG or generate 36.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sonova H Ag  vs.  Medartis Holding AG

Sonova H Ag

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sonova H Ag has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sonova H is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Medartis Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Medartis Holding AG are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Medartis Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonova H and Medartis Holding

The main advantage of trading using opposite Sonova H and Medartis Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonova H position performs unexpectedly, Medartis Holding can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Medartis Holding will offset losses from the drop in Medartis Holding's long position.

The idea behind Sonova H Ag and Medartis Holding AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.